Netflix and Higher Education: Leverage, Leadership and Talent Development

Institutional leaders need to take note of the levers Netflix has used to dominate its marketplace and apply some of that business’s key lessons to the postsecondary space.

More than two thousand years ago, the Greek philosopher Archimedes said, “Give me a lever and a place to stand and I will move the world.”

Fast-forward to our post-industrial society and one quickly finds that organizations that succeed in today’s knowledge-based economy have embraced this practice of leverage: generating more value with less capital. In real estate and financial trading, leverage generally refers to the practice of generating more of an asset using borrowed funds or capital. In the high-technology business sector, leverage often depends on the intersection of an improved product or service using a new technology or innovation.

So what does all of this have to do with higher education?

As the core deliverables or services that make up higher education are increasingly unbundled, rebundled and subjected to more competitive market forces, winners and losers have emerged and left a trail of cautionary tales and lessons learned. Common to many of the success stories in higher education is the concept of scaling one’s core services to a larger audience using the “levers” of today’s economy: emerging technologies, specialized labor and innovative strategies implemented by visionary leadership. In light of these trends, it’s not surprising that distance education has moved front and center in most postsecondary strategic plans as the most likely means to grow institutional reach and revenue.

Accordingly, there is much to learn from companies who have succeeded in our current business environment with an eye towards understanding the strategy and operational characteristics that provided them with a competitive advantage. Earlier articles in The EvoLLLution have pointed to companies such as Amazon, IBM and others showing how the distance between private corporations and postsecondary institutions has narrowed due to the increased competition in the education sector and the rapid privatization of colleges that receive less and less state and federal dollars every year. For better or worse, this untethering of postsecondary institutions from state funds has forced colleges to assume a more competitive financial posture and adopt more aggressive business practices. At many universities this shift might be best exemplified by the relatively recent resurgence of the outreach function and the quota-driven nature of advancement activities.

­­­In most cases, postsecondary institutions have much to leverage: a trusted brand, strong social networks, historical success in their sector, intellectual property and tremendous human capital. Similarly, Netflix has benefited from a well known brand, emerging technology, visionary leadership and a host of strategic decisions that allowed a very small group of programmers to outperform large and well-established competitors. While Netflix has only more recently begin to create its own intellectual property, the majority of its media content is secured by a group of lawyers and staff who purchase media licensing rights.

Although Blockbuster dominated the DVD market in the late 1990s and early 2000s, Netflix continued to reinvent its business model, focused its attention on a future client base, gathered specialized human capital and leveraged this potent cocktail of disruptive innovation to unseat Walmart, Blockbuster and a host of smaller DVD distributors. While the story deserves more detail that what can be offered here, there are helpful lessons leaders in higher education can draw from. For the purposes of this article, think of each bullet point below as a dimension of leverage, one possible vehicle that can be used to do more with less in a resource-constrained and crowded business environment.

1. Syndication

While emerging technologies, cloud-based solutions and more efficient delivery of content (streaming technology) helped Netflix to succeed, it was the underlying principle of syndication that drove many of their business decisions. Netflix’s decision to cannibalize their DVD business in light of diminishing returns and the future promise of increased customers who would prefer streamed content was visionary and relied on expansive syndication.

Universities must continue to generate intellectual property, but should be more thoughtful about how to more effectively syndicate and decentralize knowledge via pedagogies such as peer- and competency-based learning and online learning platforms such as Open Educational Resources. Such an approach fits well with the increasing decentralization of knowledge gatekeeping while raising the brand or reputation of universities as a node in the larger network of content providers.

2. Fee for Service

Netflix (and others) continue to refine their business model almost real-time as the customers who consume their services provide ongoing input about their needs and preferences. Not surprisingly, this type of user responsiveness is dependent on powerful adaptive online technologies that will one day reshape the education sector. Universities should not lose sight of this type of nimble business practice, particularly as the unbundled fee-for-service model becomes more ubiquitous. Magazines, newspapers, enterprise software developers and more recently cable TV are some of the more recent victims of this continued movement towards unbundling.

Higher education is most likely still on the front end of market forces that will force them to offer learners access to discrete or decoupled services and resources that are currently only available to the fully matriculated traditional student. The boundaries between credit, non-credit, mode and pricing will continue to blur as universities are forced to increase access to more of their enterprise with à la carte pricing to business services, corporate training, assessment and micro credentialing. Wise university leaders have already been preparing for this shift.

3. Leadership

Perhaps the most overlooked aspect of the Netflix story is the dependence on strong leadership. Leaders in today’s modern postsecondary institution must see beyond the short-term gains of initiatives that focus on traditional learners using traditional resources. The true genius of Netflix’s story is their ability to foresee the needs of a future customer base. Such prescient navigation requires a willingness to take risk and data-driven connection to emerging trends.

In short, the ideal leader in higher education is forward facing, informed and supports their team in developing this kind of culture. The shortsighted university makes only short-term decisions and devalues the development of such leadership capacity.

4. Talent Management

Just like Netflix, postsecondary institutions that desire to change the world around them while thriving in a more tumultuous business environment must value their employees more than any other resource in the enterprise. Netflix knew that their success depended on hiring the most talented staff possible and took unusual steps to recruit staff from other cloud-based companies such as Amazon and Facebook. They were ruthless and highly principled in this regard. Universities must also articulate a clearer vision of their future audience and work aggressively to hire the appropriate talent to build its next methods, tools and services to service that demographic. And lastly, universities, just like successful businesses, must do everything in their power to retain and develop these individuals.

Conclusion

There are obvious benefits for universities to retain many of the existing principles and business models that have brought them success and allowed them to serve the public in meaningful ways. However, woe to the university that loses sight of the core reason for their being: serving learners and communities.

While there are aspects of higher technology and business startup culture that many university leaders would rightly find a mismatch with their institution’s mission, this question of how to create increased value for learners from a smaller base of resources will continue to be a paradox that future higher education leaders will need to solve. And undoubtedly, the levers that move the world around them will include the right mix of technologies, human capital and visionary leadership.